“Dubai Property Remains Attractively Priced”

June 2015

Adil Taqi, Group Chief Financial Officer, DAMAC Properties, tells Wealth Monitor how offering the right product at the right time positioned and priced attractively remains key to success

Since its listing in January this year, shares of DAMAC Properties have risen by 21% as at May 21, 2015, outperforming DFM Index. How do you look at the stock’s performance till date?
DAMAC has been operating in Dubai’s property market since 2002 and has quickly risen to become a household name, not only in Dubai but the entire Middle East region. It is a natural development for a company to ultimately find itself on the stock market. Our customers are a shared part of our success in terms of not only investing in the properties that we have been offering but also by buying and enjoying the financial investment in terms of investing in DAMAC stock. This only underlines the fact that DAMAC stock is a great asset valued attractively and the capital market recognizes that.

In Q1 this year DAMAC Properties posted a 3% quarterly growth in net profit to AED 793 million. How do you read this at a time when the moderate property market has tempered sentiment?
In any market, you need to have the right product at the right time positioned and priced attractively. Dubai is a right place to be in where property prices remain attractively priced. Real estate in Dubai offers a fantastic investment avenue bolstered by its location, attraction, tax-free lifestyle, cost of living, tourism hotspots, the cost of investment and the list goes on. We believe DAMAC is in a right city, in the right sector and at the right time, well positioned to offer the right product. We pride ourselves in doing that consistently. Add to that is our commitment and focus on execution reinforcing the belief of our customers and investors that we are a developer that will deliver on time. We have so far managed to deliver over 14,000 units, and around 9,000 of those have been delivered since 2012.

In its latest Q1 financial statements, DAMAC had announced that the dividend payment this year will be made over at least two payments: an interim of 10% and a final payment of 15%. Is there any latest update on this for your shareholders?
Quarterly earnings announcements contain forward-looking statements relating to future events or future financial performance of a company. Whilst, operationally, we stand committed to what we said in the announcement, we have already made a regulatory announcement where we have said that these are the statements about the future, subject to realization of performance and subjective to regulatory procedural events such as board meetings, AGM approval, etc.

What was the objective behind listing DAMAC’s Global Depositary Receipts (GDRs) on the London Stock Exchange (LSE) – was it valuation issues, or tapping into a larger group of investors and benefitting from less stringent ownership rules?
Although we got GDRs listed on LSE in December 2013, the decision to launch the IPO was made in January-February that year. That time the market conditions in the UAE were not appropriate to take the IPO of that size. That was the reason why we opted for LSE as a better avenue to open the IPO window. And while London listing was right and it served its purpose, our preferred place would always be Dubai.

And now when DAMAC has delisted GDRs, how this delisting has added value to your shareholders?
The swapping of GDRs into for shares listed on the Dubai Financial Market (DFM) was a bespoke transaction that by all standards the first of its kind in the region. Our management team worked hard with our advisors to get it right and we managed to do that in a very seamless operation. There were actually two elements here – listing in Dubai and delisting from London and each of the two has brought value to our shareholders. I don’t think there is any dispute on how coming to DFM brought in value, as there is lot of liquidity, lot of visibility, this is where the retail money sits. The delisting from LSE helped the company in two ways – one, it reduced the administrative costs of running two companies. Most importantly, the delisting hasn’t split our float, and we are still under 15% float as a company. If you split that between two markets you get very small float in each of the markets and the trading gets very small.

How do your assess the demand for affordable housing in Dubai? Is it going to occupy key position in any regional developer’s business plan going forward?
There is no market anywhere in the world that doesn’t have the latent demand for affordable housing. Whether it is New York where some penthouses sell for $100 million or London where you’ve £6,000 per foot property, there is and will always be demand for affordable housing. Having said that, I prefer to use the term value buying than affordable housing, because affordable is more of a relative term. Also, one cannot ignore the fact that there is a general shortage of villas too in Dubai. So it’s not only about affordability.
What would be your thrust going forward. Are you going to focus only on luxury real estate market or diversify across mid- and affordable housing segment too?
We believe value buying and luxury are not inconsistent. We’ll continue to offer our customers the best property for that sum of money. Whichever category our customers are in, DAMAC will be at the top of that category. We have got a range of products from studios to penthouses worth millions of dirhams. Naturally, Akoya and Akoya Oxygen will be our focus because it’s all about being the right product at the right time and pricing and delivering it profitably.

The weakening of the euro against the strengthening dollar has negatively impacted the inflow of European tourists to UAE. How this has impacted your hospitality business — Damac Hotels & Resorts?
We have been seeing a mix of customers in our hospitality business. This includes customers from China who are not affected by the euro, or the GCC-based families who spend in local currencies that are dollar-pegged. Because of this, our hospitality business is not sensitive to the dollar movement. The only people that could have lost are European customers because of the euro’s weakening.